Nat Power in pounds 2bn Drax sale
Thursday 26 November 1998
The 4,000 megawatt Drax coal-fired station in North Yorkshire generates up to 10 per cent of Britain's electricity and consumes 10 million tonnes of coal a year.
News that National Power was selling its flagship station accounting for 40 per cent of output, coupled with a 16 per cent decline in interim profits, unnerved the City and the company's shares fell 4 per cent. Analysts warned the Drax deal could dilute earnings.
National Power said it aimed to complete the disposal of Drax in the first half of next year. Selling the station will cut National Power's share of the generating market from 21 per cent to 12 per cent. In return, it expects to get regulatory approval for the pounds 180m purchase of Midlands Electricity's supply business.
Midlands has 2.2 million domestic customers and made a profit on pounds 19m last year from electricity supply. The acquisition of the business, which employs 1,400 people, will give National Power 12 per cent of the electricity supply market in England and Wales.
In addition to the pounds 180m purchase price, National Power will also take on an estimated pounds 100m-pounds 200m of liabilities arising out of Midlands' long- term contracts to buy electricity at high prices. It is likely that the regulator will impose conditions on the deal, preventing National Power's generating arm selling electricity direct to the Midlands supply business.
Trades unions last night voiced fears for jobs and called for an early meeting with the two companies.
Drax, Britain's newest, most efficient and cleanest coal-fired station, opened in 1974. The nearby Selby coalfield was developed to supply the station and there is a railhead at Drax which takes supplies of coal direct from the pit complex.
First half pre-tax profits fell from pounds 260m to pounds 217m after a near halving of international profits caused by a dispute in Pakistan. The new government in Karachi has slashed payments for electricity from the Hub and Kot Addu stations which National Power operates alleging that the original contract, awarded by Benazir Bhutto's government, was the result of fraud and corruption. National Power, which has invested pounds 260m for minority stakes in the two stations, denies the allegations.
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